We continue our TQC Q&A Series with a question and answer session focused on the sports memorabilia and collectibles market with Ezra Levine. By way of introduction, Mr. Levine is the CEO of a startup called Collectable whose goal is to revolutionize the multi-billion-dollar sports memorabilia and cards industry. Collectable is a fractional ownership investment platform and marketplace that enables the general public to own shares of the most sought-after sports memorabilia in the world.
In addition to leading Collectable, Mr. Levine also serves as the Chief Strategy Officer & CFO of The Spring League, a professional developmental football league that organizes talent showcases throughout the United States. Prior to this, he was a Portfolio Manager & Trader at Hilltop Park, a NYC based hedge fund.
Mr. Levine graduated from the University of Michigan in 2010 and earned an MBA from New York University in 2016.
tQc: Ezra, we appreciate you taking some time to sit down with us today. Before we delve into our subject matter, tell us something else about yourself that our readers might like to know?
Excited to be here. As a frequent TQC reader, I appreciate your weekly insights and thoughtfulness. I grew up on the Upper West Side of Manhattan, where I now live with my wife and 15-month old son, Eli. As a matter of fact, my dad has been the senior rabbi of Congregation Rodeph Sholom for ~30 years. I also love to golf and play tennis in my free time.
tQc: Please explain what Collectable’s mission is?
We are applying widely accepted financial market principles to a fragmented, and in many ways antiquated, memorabilia and card market. Think of Amazon stock. You can purchase shares of Amazon on a public stock exchange without needing two trillion dollars to acquire the whole company. By fractionalizing high value sports collectibles, we enable people to purchase equity or fractional stakes in expensive memorabilia in a similar way they might purchase stock of Amazon or Apple.
In addition to operating a fractional ownership marketplace, we create sports related content and will be rolling out a digital and live events business shortly.
tQc: What is Collectable’s value proposition?
As a fractional ownership platform, our primary value proposition is access. We allow all sports fans, collectors, and investors the ability to invest in some of the finest, most valuable, and most culturally and historically significant sports memorabilia in the world.
tQc: Talk to us about demographics and your target market. Isn’t sports memorabilia and card collecting an older person’s hobby? Are young people even interested in this space?
It’s a good question. Collecting and investing in trading cards and related memorabilia have traditionally been considered an older person’s hobby. To that end, we have a tremendous pipeline of vintage items that will appeal to older collectors, investors, and fans. However lately, trends have been skewing younger. In fact, card collecting has quietly become a cultural phenomenon. We plan on leveraging that momentum by educating younger consumers about our unique product opportunity.
Additionally, some people look at cards as another way to speculate on sports, with crossover appeal to the sports gambling and fantasy sports crowd. Hence, our target market is broad, deep and holds tremendous potential to capitalize on ancillary businesses opportunities.
tQc: That answer dovetails nicely into our next question. There has been a major shift in the public's attitude towards sports gambling. Many states are now allowing online sports wagering. Any plans to offer live betting on your platform?
Not anytime soon. We are laser focused on the fractional investment side of the business. Part of our mission is to raise awareness for sports memorabilia as a viable alternative investment asset class deserving of an allocation in a diversified portfolio.
tQc: Who is your competition?
Currently, we are the only fractional ownership platform exclusively focused on sports memorabilia and cards. Other fractional companies in different categories include Rally Rd (generalists), Otis (art & collectibles), Masterworks (art), Mythic Markets (pop culture), among others.
One could argue that traditional auction houses and eBay are competitors; we would disagree. Collectable provides an alternative path to ownership, liquidity, and diversification than what currently exists.
tQc: At Collectable, you can "buy" and "sell" fractional shares of iconic sports memorabilia. That said, is the public buying securities and if so, are these securities registered with the Securities & Exchange Commission (SEC)?
Yes, the public is buying securities. All our offerings/securities are registered with the SEC. We also partner with registered broker dealers who ensure compliance, verify investor identities, issue shares and facilitate transactions. In fact, our investor signup process is quite similar to opening a traditional brokerage account. As a side note, we will be allowing investments through qualified IRA’s shortly.
tQc: Is there a "cost" to transact?
Yes, there will be a small transaction cost per trade. We will be rolling out our secondary (trading) market feature with our technology partner in the next few months. As technology costs decrease and industry infrastructure matures, we expect these costs to decline.
tQc: How can somebody offer their sports memorabilia on your platform?
We have a consignment tab on our website where people can “pitch” us their memorabilia. They can also contact us over email or social media.
We have strict criteria which we use to curate offerings. The main factors we evaluate are cultural and historical significance, scarcity, authenticity, and room for upside potential. Items tend to have a minimum value of $20,000-$30,000.
tQc: Does Collectable pay for inventory or is it a consignment only model?
So far, all of our offerings are on consignment; that said, we have the ability to opportunistically purchase inventory if needed.
tQc: Collectable clearly provides a unique offering to allow the public to participate in potential price appreciation of blue-chip memorabilia. On the contra side, if a participant on your platform believes the price of a piece of memorabilia will fall, will you be providing a way to express that view as well?
Love the idea. We have had discussions internally on feasibility and what that would look like. To facilitate this, our secondary (trading) market feature must mature. Expressing a view that a specific piece of memorabilia will drop in price will be a unique feature of Collectable that we hope to roll out in the future.
tQc: There was an investment "bubble" in the 1980s and 90's in trading card collecting, especially baseball cards. Even now, "stars" can be purchased for pennies on the dollar – I have many (both parties laugh). Talk to us about that. Is there any hope for 80's and 90's baseball cards to recoup a substantial part of their value?
The three primary factors driving the card market are condition, scarcity, and popularity of the underlying player. The card market crash from 1987-1994, dubbed the “Junk Wax Era”, was simply a function of oversupply. The hobby was booming, and manufacturers tried to be opportunistic. By some accounts, card manufactures nearly tripled production. As the market became flooded with supply, prices cratered.
The eternal optimist in me is holding out hope that the “worthless” narrative becomes so widespread that everyone just throws away these cards - to the point where one day they may become scarce and valuable once again! Wishful thinking. Apologies to my parents for taking up valuable closet real estate in my childhood bedroom.
Still, it all comes back to condition, scarcity, and popularity of underlying player, and there are some wildly valuable exceptions from that era. Two prominent examples include, a 1993 Upper Deck SP PSA 10 Derek Jeter #279 Rookie Card can sell for close to $200,000, or 1986-87 Michael Jordan Fleer PSA 10’s are selling for close to $100,000.
Luckily, card manufacturers have seemed to learn from their overproduction mistakes and seem committed to limiting supply to support rising prices - though this always remains an industry risk.
tQc: One of the three primary drivers of value you just mentioned is “condition.” To that end, please explain what trading card ratings or gradings mean. How are the cards graded and what effect does it have on the cards value?
I could spend an entire article describing the intricacies of different grading agencies and their respective grading systems. In the most simplistic terms, cards are graded numerically, 1-10, based on their condition. The better the condition, the higher the grade the card will receive. The higher the grade the card receives, the more valuable the card is. Higher grades are, of course, more rare than lower grades.
For your readers familiar with public markets investing, the leading sports card grader PSA is owned by Collectors Universe, a publicly traded company under the symbol CLCT. As of today’s, writing, the stock is up 90+% year to date. Point being card grading is a big, profitable business.
tQc: So when you previously mentioned the Derek Jeter PSA 10 #279 Rookie Card worth $200,000, a large part of that value is because that card has a numerical rating of “10”?
Yes, that is correct.
tQc: What is the future of this business?
At Collectable, we are excited to modernize and democratize a growing alternative asset class. We are allocating our human and financial capital to scaling our user base and broadening our product offerings. This will enable us to increase liquidity and lower transaction costs for our customers. We already have about $30m worth of items in line for consignment that we will be offering to our users over time. We also plan to grow our international footprint.
tQc: How can our readers learn more about Collectable's product offerings?
Download the Collectable app (and leave a 5-star review, of course!), available for both iOS and Android, to browse our offerings. You can also check us out on social media @CollectableApp or on our website.
tQc: Thank You Ezra.